In Pakistan 67 Sugar Mills are operating having
crushing capacity of 361,300 tons of cane per day (TCD). Seven Sugar
mills extended capacity but they are unable to utilize. Based on 160
days season these sugar mills have a total crushing capacity of 58
million tons of sugarcane capable to produce 5 million tons of refined
sugar and 3 million tons of molasses.

In order to enable the country to be
self-sufficient in sugar, a minimum area of 1.150 million hectares
should remain under sugarcane cultivation, which can produce 50
million tons at an average yield of 43.86 tons per hectare. The
Government should insure that at least 76% of the sugarcane grown in
the country is utilized by all sugar mills. It means that a total of
38.3 million tons if compulsorily utilized by the mills can easily
produce white refined sugar of 3.3 million tons per season at an
average sucrose recovery of 8.62%. Pakistan present population is 13.5
million head count. With an average growth rate of 2.5% per annum, the
population of the country will grow year to year as shown in graph and
table I. The per capita consumption of sugar in Pakistan is about 22
kg. The estimated domestic consumption is provided in table I and
graph IA. Keeping in mind the balance production of agricultural
sector and peculiar problems the sugar industry face due to being its
status of political industry, and its seasonal nature the minimum
production of 3.3 million tons per season will be sufficient enough to
meet not only the domestic demand but also make surplus sugar
available during the next three years as shown in the table.

It is very important point that by utilizing 38.3
million tons of cane against their normal plant capacity of 58 million
tons of sugarcane, the mills would still have unutilized capacity of
34%. This clearly signals that the existing mills are sufficient
enough to produce the country's requirement of sugar until the next
three years. The Government should focus its policy for increasing the
production of sugarcane on the existing area under cultivation and
sugar output by the available mills. It should not encourage further
increase in the number of sugar mills.

MAJOR
STATISTICS

1.

Operating Mills

67

2.

Cane Crushing Capacity

58 million tonnes

3.

Capacity Utilization

66 %

4.

Production

Refined Sugar

5 million tonnes

Molasses

3 million tonnes

5.

Average Sugar Cane
Yield per hectare

(i) Pakistan

43.86 tonnes

(ii) World

60.00 tonnes

6.

Average recovery

Pakistan

8.62%

7.

In 1998-99 , 73 Sugar mills produced

3.521 million tonnes

8.

National demand

3.20 million tonnes

9.

Labour force

100,000 people

10.

Involvement in the production of sugar cane

9 million people

11.

5 years Average Cost of production (1996-2000)

Rs. 14850 / tonne

12.

5 year Average Selling price (1996-2000)

Rs. 14920 / tonne

13.

Land under cultivation

1.01 million hectares

14.

Land required to cultivate and achieve
self-sufficiency in production

1.15 million hectares

The sugar
industry which is the second largest in the country after textile, has
great economic significance for the country. This could be gauged from
its immense employment potential, providing jobs to more than 100,000
labour force and involving about 9 million people of rural population
in the production of sugarcane.

Sugar is commonly used as a sweetener. It is one of
the world's valuable nutritious foods and is the main source of
carbohydrates and provides inexpensive calories for human body.
Pakistan is producing high quality sugar of international standards
but it is costlier due to various factors.

Existing
mills area sufficient enough to produce the country's requirement of
sugar. The government should, therefore, focus on increasing the
production of sugarcane on the existing area under cultivation and
sugar output by the existing mills. It should not encourage increase
in the number of sugar mills.

Comparison
with Other Economies of the SAARC Region

A comparative
analysis of Sugar Industry average selling prices in Pakistan,
Bangladesh and India is tabulated below:

Pakistan has
the most efficient operations of sugar mills as compared to Bangladesh
and India.

Labour and
Overhead costs in Pakistan shows much better unit cost most probably
due to better capacity utilization as against Bangladesh & India.

If we manage
to utilize the remaining 34% unutilized capacity we can maximize sugar
production on the available hectarage for continued self-sufficiency.

The
Government should seriously think about the critical problems facing
the sugar industry and take remedial measures.

Since the
de-zoning the incentive for sugar mills to direct resources for the
development of good variety cane in its area has almost diminished
because the grower is free to take his sugarcane to any mill
irrespective of which mill advanced him the loan for development.
De-zoning is thus also one of the major causes of the sickness of the
sugar industry. However, larger interests of the growers of the area
and those of the others associated with a sugar mill that collapses
due to non-availability of cane is badly affected.

In this
situation some mills which can not offer immediate hard cash payment
to the growers in their zones normally start starving of the raw
material and are ultimately closed which results in the collapse of an
important national asset, loss of revenue to the government exchequer,
unemployment among the nearby rural population. Thus closure of sugar
mill contributes to a decline in the GDP as well as to an increase in
poverty.

The
government should seriously think about this critical problem and make
remedial measures alongwith those suggested below to avert the crisis
in future.

Timely review
of support prices by the government provides incentives to farmers for
cultivation of crops. Since Pakistan is an agrarian country and is
heavily indebted, it is absolutely essential that a balanced policy
for cultivation of the four major cash crops — wheat, cotton, rice
and sugarcane, as well as the minor crops of oil seeds should be
chalked out to meet the food requirement of growing population of the
country. An incentive should be provided to the growers for
cultivation of sugarcane on 1.15 million hectares.

The support
prices of sugarcane can not work at all through the free market forces
due to the simple reason that retail price of sugar is regulated by
the Government through imports. The support prices of other cash crops
such as wheat, rice and cotton are also similarly regulated. It is
obvious that two economic theories — (1) principle of supply and
demand governed by market forces for cane, and (2) government control
- of retail price of sugar ñ cannot work together and will further
worsen the sugar crisis in the country.

The writer is
Director Research, Admin & Finance at Institute of Cost and
Management Accountants of Pakistan (ICMAP)